COMMISSIONER OF INCOME TAX CHD vs. STATE BANK OF PATIALA

ITA/400/2015HC Punjab & HaryanaPHHC01110052201504 February 2016Author: MR. JUSTICE RAMESHWAR SINGH MALIK,MR. JUSTICE SURINDER GUPTA8 pages
AI SummaryDismissed

What were the facts?

During a TDS survey on the assessee, State Bank of Patiala, it was found that tax was not deducted on interest paid to four parties claiming exemption under Sections 12A and 10(23C). The bank admitted the default and deposited the TDS of ₹22,58,086 along with interest of ₹2,14,732, totaling ₹24,72,818, on March 1, 2013. Penalty proceedings under Section 271C were initiated, and a penalty of ₹22,58,086 was imposed. The CIT(A) allowed the assessee's appeal, deleting the penalty. The Tribunal upheld the CIT(A)'s order. The revenue has appealed this decision to the High Court.

What did the High Court hold?

The High Court held that no substantial question of law arose from the order of the Tribunal. The Court affirmed the concurrent findings of the CIT(A) and the Tribunal that the penalty under Section 271C was not leviable. The reasoning was that for three of the societies, TDS was not applicable under Section 194A(3)(iii)(f) read with Notification S.O.3489, as they were government-financed societies registered under the Societies Registration Act, 1860. For Shri Aurobindo Society, the existence of a valid exemption certificate under Section 80G(5)(vi) and a 'nil' declared income provided a reasonable cause for non-deduction. The Tribunal's finding that the assessee had a genuine belief and a reasonable cause for failure, thus falling under Section 273B, was upheld. The Court found no perversity or misappreciation of evidence in the lower authorities' approach. Consequently, the appeal was dismissed.

What were the issues?

1. Whether the ITAT was correct in deleting the penalty imposed under Section 271C read with Section 274 for failure to deduct tax at source on interest paid, as required by Section 194A of the Income Tax Act, 1961? 2. Whether the ITAT was correct in holding that the assessee was not liable to deduct tax at source under Section 194A? 3. Whether the ITAT was correct in holding that the assessee had a genuine belief that it was not required to deduct tax at source under Section 194A? Assessee's Contentions (Implicitly supported by lower authorities and Tribunal): - For three societies (Haryana Rural Roads and Infrastructure Development Agency, Punjab ICT Education Society, Haryana State Council for Science & Technology), TDS was not applicable under Section 194A(3)(iii)(f) read with Notification S.O.3489 dated 22.10.1970, as they were registered under the Societies Registration Act, 1860, and financed by the Government. - For Shri Aurobindo Society, an exemption certificate under Section 80G(5)(vi) was valid for AY 2011-12, and its total income declared was 'nil', providing a reasonable cause for non-deduction. - The assessee had a genuine belief that deduction was not required, falling under Section 273B due to reasonable cause. - Relied on ITAT order in ITO v. State Bank of Patiala, Kusumpti, Shimla (ITA No. 271/CHD/2014) and Himachal Pradesh High Court judgment in CIT(TDS) Chandigarh v. State Bank of Patiala, Shimla (ITA No. 17/2014). Revenue's Contentions: - The revenue argued that the ITAT was wrong in deleting the penalty and holding that the assessee was not liable to deduct tax at source or had a genuine belief for non-deduction.

Which sections of the Income-tax Act were involved?

Section 260A,Section 133A,Section 194A,Section 201,Section 201(1A),Section 271C,Section 272A(2)(k),Section 273B,Section 274,Section 10(23C),Section 12A,Section 80G(5)(vi)

AI-generated summary — verify with the full judgment below

-1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of Decision: 4.2.2016 The Commissioner of Income-tax (TDS)-I, Chandigarh ....Appellant. Versus State Bank of Patiala, SCO 3-A, Sector 7-C, Chandigarh ...Respondent.

1.

Whether the Reporters of the local papers may be allowed to see the judgment?

2.

To be referred to the Reporters or not? YES

3.

Whether the judgment should be reported in the Digest? CORAM:- HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. HON'BLE MRS. JUSTICE RAJ RAHUL GARG. PRESENT: Mr. Denesh Goyal, Advocate for the appellant. AJAY KUMAR MITTAL, J.

1.

This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 27.2.2015 (Annexure A-4) passed by the Income Tax Appellate Tribunal, Chandigarh Bench “A”, Chandigarh (hereinafter referred to as “the Tribunal”) in ITA No. 1129/CHD/2014, for the assessment year 2011-12, claiming the following substantial questions of law:- (i) Whether the ITAT was right in law in deleting the penalty imposed by the AO u/s 271C read with Section 274 of the Income Tax Act for GURBACHAN SINGH 2016.04.07 1

The order continues below.

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